slide 6.1 dave chaffey, e-business and e-commerce management, 3 rd edition © marketing insights ltd...

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Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007

Chapter 6Supply Chain Management

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Learning outcomes

• Identify the main elements of supply chain management and their relationship to the value chain and value networks

• Assess the potential of information systems to support supply chain management and the value chain.

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Management issues

• Which technologies should we deploy for supply chain management and how should they be prioritized?

• Which elements of the supply chain should be managed within and beyond the organization and how can technology be used to facilitate this?

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SCM – some definitions

• Supply chain management (SCM) The coordination of all supply activities of an organization from its suppliers and partners to its customers

• Upstream supply chain Transactions between an organization and its suppliers and intermediaries, equivalent to buy-side e-commerce

• Downstream supply chain Transactions between an organization and its customers and intermediaries, equivalent to sell-side e-commerce.

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Figure 6.1 Members of the supply chain: (a) simplified view, (b) including intermediaries

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Table 6.1 Objectives and strategies for effective consumer response (ECR)

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Figure 6.2 A typical supply chain (an example from The B2B Company)

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A history of SCM at BHP Steel

• Early implementation 1989-1993. This was a PC-based EDI purchasing system.

• Objectives:– reduce data errors to 0,– reduce administration costs,– improve management control,– reduce order lead time.

• Benefits included:– rationalization of suppliers to 12 major partnerships (accounting for 60%

of invoices). – 80% of invoices placed electronically by 1990. – 7000 items were eliminated from the warehouse, to be sourced directly

from suppliers, on demand. – Shorter lead times in the day to day – from 10 days to 26 hours for items

supplied through a standard contract and from 42 days to 10 days for direct-purchase items.

• Barriers:– Mainly technological.

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Electronic trading gateway 1990-1994

• Character– Also EDI-based, but involved a wider range of parties both

externally (from suppliers through to customers) and internally (from marketing, sales, finance, purchasing and legal)

• Aim– Provide a combined upstream and downstream supply chain

solution to bring benefits to all parties• Learnings

– The difficulty of getting customers involved – only four were involved after 4 years, although an industry-standard method for data exchange was used. This was surprising since suppliers had been enthusiastic adopters. From 1994, there was no further uptake of this system.

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The move towards Internet commerce 1996 onwards

• The Internet was thought to provide a lower-cost alternative to traditional EDI for smaller suppliers and customers, through using a lower-cost value-added network.

• Objectives:– Extend the reach of electronic communications with supply chain partners. – Broaden the type of communications to include catalogue ordering, freight

forwarding and customer ordering. • Strategy divided transactions into 3 types:

– Strategic (high volume, high value, high risk) – a dedicated EDI line was considered most appropriate.

– Tactical (medium volume, value and risk) EDI or Internet EDI was used. – Consumer transactions (low volume, value and risk) – a range of lower-cost

Internet-based technologies could be used. • Benefits:

– One example of the benefits has been reducing test certificates for products from $3 to 30 cents.

• Barriers:– The main barriers to implementation at this stage have been business issues, i.e.

convincing third parties of the benefits of integration and managing the integration process.

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Figure 6.3 Push and pull approaches to supply chain management

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Figure 6.4 Two alternative models of the value chain: (a) traditional value chain model, (b) revised value chain modelSource: Figure 6.4(b) adapted from Deise et al. (2000)

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Figure 6.6 The Worldwide Universities Network showing member institutions (www.wun.ac.uk)

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Figure 6.7 The characteristics of vertical integration, vertical disintegration andvirtual integration

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Benefits of applying IS to SCM

• Increased efficiency of individual processes– Benefit: reduced cycle time and cost per order as described in

Chapter 7• Reduced complexity of the supply chain

– Benefit: reduced cost of channel distribution and sale• Improved data integration between elements of the supply chain

– Benefit: reduced cost of paper processing• Reduced cost through outsourcing

– Benefits: lower costs through price competition and reduced spend on manufacturing capacity and holding capacity. Better service quality through contractual arrangements?

• Innovation– Benefit: better customer responsiveness.

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Benefits to buying company

• Increased convenience through 24 hours a day, 7 days a week, 365 days ordering

• Increased choice of supplier leading to lower costs

• Faster lead times and lower costs through reduced inventory holding

• The facility to tailor products more readily

• Increased information about products and transactions such as technical data sheets and order histories

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Figure 6.8 Popularity of different e-business applications in Europe according to company sizeSource: eEurope (2005)

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Figure 6.9 Proportion of businesses that integrate with their suppliers, or plan toSource: DTI (2004), Fig. 7.5b

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Figure 6.10 Barriers to implementing information and communications technologySource: DTI (2004), Fig. 5.2f

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Figure 6.11 A typical IS infrastructure for supply chain management

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Figure 6.12 Alternative strategies for modification of the e-business supply chain

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Chapter 7E-procurement

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Learning outcomes

• Identify the benefits and risks ofe-procurement

• Analyze procurement methods to evaluate cost savings

• Assess different options for integration of organizations’ information systems withe-procurement suppliers.

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Management issues

• What benefits and risks are associated withe-procurement?

• Which method(s) of e-procurement should we adopt?

• What organizational and technical issues are involved in introducing e-procurement?

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How important is procurement?

We estimate that for every dollar a company earns in revenue, 50 cents to 55 cents is spent on indirect goods and services – things like office supplies and computer equipment.That half dollar represents an opportunity: By driving costs out of the purchasing process, companies can increase profits without having to sell more goods. Hildebrand (2002)

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The 5 rights of E-procurement

• at the right price

• delivered at the right time

• are of the right quality

• of the right quantity

• from the right source.

Baily et al., 1994

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Figure 7.1 Key procurement activities within an organization

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Figure 7.2 Electronic procurement systemSource: Tranmit plc

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Figure 7.3 Use of different information systems for different aspects of thefulfilment cycle

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Figure 7.4 E-mail notification of requisition approvalSource: Tranmit plc

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Figure 7.5 Document management software for reconciling supplier invoice with purchase order dataSource: Tranmit plc

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Figure 7.6 The three main e-procurement model alternatives for buyers

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Table 7.6 Assessment of the procurement model alternatives for buyers

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Figure 7.7 Integration between e-procurement systems and catalogue data

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Figure 7.8 An online catalogue of items for purchaseSource: Tranmit plc

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Figure 7.9 Ford supplier portal provided by CovisintSource: Covisint.com

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Figure 7.10 Supplier Route to Government Portal (www.supply2.gov.uk)

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Table 7.7 Types of B2B marketplaces identified by Kaplan and Sawhney (2000)with examplesSource: Adapted and reprinted by permission of Harvard Business Review from table on p. 99 from ‘E-hubs: the new B2B marketplaces,’ by Kaplan, S. and Sawhney, M., in Harvard Business Review, May–June 2000. Copyright © 2000 by the Harvard Business School Publishing Corporation, all rights reserved

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